Futu Holdings Ltd (NASDAQ: FUTU) plunged by 5.05% or the stock price dropped by -$8.37on Tuesday. In the after-hours of Tuesday market, the stock was up by 2.28%.
Becoming the largest brokerage in China
Futu Holdings Limited is a brokerage firm and its headquarters are based in Hong Kong. The platform of this brokerage is online and the access to this brokerage accessible through any internet-device. The Futu firm is gaining massive success in China and is considered a leader in its overseas security brokerage market.
Being a brokerage firm that is leaning towards technology sector, Futu Holdings is making the right move of investing heavily in the research and development of its technology as well as in analytical tools through which it also serves the role of market-news/data provider on its online platform, for the investors.
Since the Pandemic started, the stimulus packages, reduced interest rates and restrictions in physical business had made way for the online platforms to be at the center-stage of businesses. This definitely had the same lucrative opportunities and avenues opened for brokerage market where the investors and consumers attention focused on online-brokerage firm like Futu Holdings (NASDAQ:FUTU).
Futu Holdings is considered the Robin Hood of China
The performance and execution of its core trade and deep-research business operations creates revenue through margin financing. It provides wealth management and investing services specifically for stock markets in USA, Hong Kong and China. Futu is also infamously considered to be the Robin Hood equivalent in China since the declaration of change in international trade relations and outlook by Chinese Government.
China is opening up its trade barriers and expanding its trade relations to attract hot foreign money into its Current Account. However, the Chinese citizens are still subjected to a quota for annual foreign exchange of max $50,000. This simply means that the Chinese Government is putting a limit on how much money flows out of the country (capital outflow).
China is also leading the world with its innovations in world-leading AI technology that has pioneered the cashless society movement in the country. Since June 2020, nearly 57% of the country’s payments and transactions carried out by its citizens have been done through using mobile. China is also leading the lead in innovation and adoption in Fintech; scoring 87% in Ernst & Young’s 2019 fintech adoption index.
Rise of Digital-brokerage since the Pandemic
This opportunity is big for the Chinese digital-brokerage which can now attract a lot of attention from USA in its overseas market portfolio especially since from the pandemic, the retail investor’s involvement in online-market is at its highest growth. The perks of digital brokerage are heavily rewarded in this era because they allow for friendly accessibility with reduction in costs due to no broker’s commission or hiring for that matter.
Just like the Detroit-based conglomerate Rocket Companies Inc (NYSE:RKT) has the digital-mortgage origination company by the name Quicken Loans, similarly Futu Holdings, have named their platform FutuNiuNiu (FutuBull). Analysts believe that this is the prime time for brokerage companies for continued and long term growth. Especially for Futu Holdings which has the backing of the Chinese internet giant Tencent Holdings (TCEHY) which controls a 33% stake in Futu and accelerated Futu’s digital platform to becoming one of the most friendly and accessible online global platform for a digital brokerage.
Fourth Quarterly report and positive year-long outlook
Futu has yet to release its fourth quarterly report. However, as mentioned earlier, Futu has been experiencing solid earnings and growth in its performance in Covid-19 and prior to it. The third quarterly report had indicated that it has been consecutively beating its revenue estimates for four consecutive previous quarters and especially since it became Public stock in March 2019.
Brokerage stocks are volatile and subject to changes in the interest rate however it is known by empirical evidence that digital-brokerages perform better than its traditional counterparts. The release of the next quarterly report which is believed to remain robustly positive due to serious backing of its fundamentals will then secure a sentiment of positive play for Futu Holding stock for year 2021.